TIDMDFI TIDMJAR TIDMJDS
RNS Number : 9853G
Dairy Farm International Hldgs Ltd
08 March 2018
To: Business Editor 8th March 2018
For immediate release
The following announcement was issued today to a Regulatory
Information Service approved by the Financial Conduct Authority in
the United Kingdom.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
2017 PRELIMINARY ANNOUNCEMENT OF RESULTS
Highlights
-- Underlying profit 13% lower at US$403 million, after US$64 million of business change costs
-- Poor operating results from Southeast Asia Food
-- Strong trading performances from Health and Beauty, IKEA, Maxim's and Yonghui
"After a disappointing year in 2017 for our Food businesses in
Southeast Asia, actions are being taken to improve their long-term
performance. All of the Group's other formats and markets are
trading well and growth opportunities are being pursued, in
mainland China and elsewhere. With our established market positions
in a range of retail formats, our strong balance sheet and our
determination to adapt to meet our customers' needs, we are well
placed to benefit from the growth prospects in the region."
Ben Keswick
Chairman
Results
Year ended 31st December
2017 2016 Change
US$m US$m %
Combined total sales including 100% of
associates and joint ventures 21,827 20,424 +7
Sales 11,289 11,201 +1
Underlying profit attributable to shareholders(+) 403 460 -13
Profit attributable to shareholders 404 469 -14
USc USc %
Underlying earnings per share(+) 29.77 34.03 -13
Basic earnings per share 29.83 34.69 -14
Dividends per share 21.00 21.00 -
+ the Group uses 'underlying profit' in its internal financial
reporting to distinguish between ongoing business performance
and non-trading items, as more fully described in note 1 to the
financial statements. Management considers this to be a key measure
which provides additional information to enhance understanding
of the Group's underlying business performance.
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The final dividend of USc14.50 per share will be payable on 16th
May 2018, subject to approval at the Annual General Meeting to be
held on 9th May 2018, to shareholders on the register of members at
the close of business on 23rd March 2018.
DAIRY FARM INTERNATIONAL HOLDINGS LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEARED 31ST DECEMBER 2017
OVERVIEW
Dairy Farm's result in 2017 was disappointing as positive
performances in most of the Group's formats and key associates were
offset by weakness in the Supermarket and Hypermarket businesses,
largely in Southeast Asia. In addition, the Group recognized US$64
million of business change costs, principally relating to the
closure of underperforming stores and stock clearance in the Food
Division. Recognizing the challenges being faced, a strategic
review is underway to determine the actions necessary to
re-establish the competitive positions of these businesses and turn
around their financial performance.
OPERATING PERFORMANCE
Sales for the year by the Group's subsidiaries of US$11.3
billion were largely unchanged from the US$11.2 billion seen in
2016. Total sales, including 100% of associates and joint ventures,
of US$21.8 billion were 7% higher, reflecting strong growth at both
Yonghui and Maxim's.
Lower operating profit for Dairy Farm's owned businesses, after
recognizing US$64 million of business change costs, was partly
offset by increased contributions from both Yonghui and Maxim's.
The resulting underlying profit attributable to shareholders was
US$403 million, down 13% from 2016. Excluding business change
costs, underlying profit would have been 1% higher. Underlying
earnings per share of USc29.77 were down 13%.
The Group generated an improved net cash flow from operating
activities of US$671 million, compared with US$543 million in 2016.
The improvement was driven by better working capital management.
Net debt at the end of 2017 was US$599 million, compared to US$641
million at the prior year end.
The Board is recommending an unchanged final dividend of
USc14.50 per share, giving a total dividend of USc21.00 per share
for the year.
In the Food Division, sales were down and profits were
significantly lower than in 2016, primarily due to poor
performances in the Supermarket and Hypermarket businesses in
Malaysia, Singapore and Indonesia. A number of underperforming
stores are being closed and prices lowered to clear or write off
discontinued and slow moving stock. In Hong Kong, sales were more
resilient, although profits were marginally down due to increasing
rents and labour costs. Positive sales growth seen in the
Philippines reflected the ongoing investments being made to improve
the business.
The Convenience Store format produced increased sales and profit
overall for 7-Eleven in the markets where the Group operates. In
part, this reflected a consumer shift to more convenient retail
formats, as well as a positive reception to the service and range
enhancements introduced for customers.
In the Health and Beauty Division, sales and profit were higher,
principally due to strong performances in Hong Kong, Macau and
Indonesia, together with improvements in mainland China. An
increasing focus on the beauty category and the continued
development of the Division's Own Brand range have helped to drive
growth.
The Home Furnishings Division recorded higher sales and trading
profit, but the reported profit declined mainly due to costs
associated with the opening of the fourth IKEA store in Hong Kong
in October 2017. Taiwan and Indonesia produced strong sales and
profit increases. There has also been encouraging growth in IKEA's
e-commerce channels.
Maxim's enjoyed good sales growth and profit expansion during
the year, in large part due to strong performances from its branded
products, particularly mooncakes, and its business in mainland
China.
The Group's 19.99% owned associate in mainland China, Yonghui
Superstores, opened a net 292 new stores in 2017, which underpinned
a 19% growth in revenue. Ongoing supply chain optimization and
shrinkage improvement resulted in improved margins, which together
with better capital utilization, led to a 45% growth in profit.
BUSINESS DEVELOPMENTS
Each Group business is committed to enhancing the shopping
experience of its customers and to serving their evolving needs as
efficiently as possible. This greater attention to understanding
and responding to changing consumer behaviour will be a central
driver of Dairy Farm's future success. Investment is also
continuing to enable the Group to compete effectively in a
challenging and changing retail landscape.
Increasing convenience through expansion and enhancement of the
store network remains a priority, and new smaller store formats are
being piloted in certain markets. The Group continued to develop
its e-commerce presence in 2017 with a number of initiatives in its
Home Furnishings, Food, and Health and Beauty operations.
Initiatives in all Divisions on range enhancement were also
progressed, resulting in an increased fresh food offering, higher
ready-to-eat participation and a broader Own Brand range
offering.
The Group, including associates and joint ventures, added a net
633 stores in 2017. At 31st December 2017, the Group had 7,181
stores in operation in 11 countries and territories, including its
interest in 779 Yonghui stores in mainland China and 1,210 Maxim's
stores.
CORPORATE DEVELOPMENTS
During 2017, Maxim's acquired the existing businesses and
franchises of Genki Sushi in Singapore and Malaysia, and of
Starbucks in Singapore. Maxim's opened its first The Cheesecake
Factory in Hong Kong in May 2017, which is trading well, and this
year will introduce an American casual restaurant format, Shake
Shack, to Hong Kong and Macau.
In the Philippines, Rustan became a wholly-owned subsidiary
following the acquisition of the remaining 34% interest from the
Group's joint venture partner.
PEOPLE
Despite challenging markets, there has been substantial progress
in delivering against existing strategic initiatives, and on behalf
of the Board, I would like to thank our colleagues for their
efforts in driving the Group forward and wish them well for the
year ahead.
Graham Allan stepped down as Group Chief Executive on 31st
August 2017 after five years of leading the business. We would like
to thank him for his contribution. His successor, Ian McLeod,
joined the Board as Group Chief Executive on 18th September and
brings over 30 years of international retailing experience. Dr
George Koo will step down from the Board at the forthcoming Annual
General Meeting and will not seek re-election. We would like to
thank him for his contribution to the Company. We are very pleased
that Dr Delman Lee, President of TAL Apparel Limited, has been
invited to join the Board with effect from 9th May 2018.
PROSPECTS
After a disappointing year in 2017 for our Food businesses in
Southeast Asia, actions are being taken to improve their long-term
performance. All of the Group's other formats and markets are
trading well and growth opportunities are being pursued, in
mainland China and elsewhere. With our established market positions
in a range of retail formats, our strong balance sheet and our
determination to adapt to meet our customers' needs, we are well
placed to benefit from the growth prospects in the region.
Ben Keswick
Chairman
GROUP CHIEF EXECUTIVE'S REVIEW
In 2017, Dairy Farm's overall performance has been
disappointing. While there was good performance from most divisions
and in particular our key associates, Maxim's and Yonghui, our
overall results have been significantly held back by the weak
performance in the majority of our Southeast Asia Food businesses.
Action was taken in the fourth quarter to close a series of
loss-making stores in Indonesia, Singapore and Malaysia and a major
clearance exercise was undertaken across Southeast Asia to
liquidate excess old stock, predominantly in general merchandise.
This resulted in the booking of significant business change
costs.
It is clear that we need a different approach to our Food
proposition in most Southeast Asian markets to turn around our
performances in these markets. This will not be a short-term fix
and an end-to-end review in each of these markets is already
underway.
STRATEGIC REVIEW
Since joining the Group as Chief Executive in September 2017, I
have spent time in each market seeking to understand first-hand the
environment and competitive landscape in which we operate, while
visiting our stores and meeting with our team members. A priority
has been to understand how we are currently perceived by our
customers and can serve them better by both addressing our existing
challenges as well as identifying opportunities for future
growth.
Despite these very real challenges, we nonetheless have a strong
foundation with several market leading businesses, with
well-established brands and passionate, committed team members,
which provides a robust platform for sustaining our current
strength while building improvement where underperformance
currently exists.
We are facing intensifying and changing competition in many
markets, both online and offline, as well as greater demands from
increasingly well-informed customers. Retail markets are evolving
and we need to be alive to these changes, which will require us to
embrace business change and develop new ways of working to improve
future performance.
The current strategic review across the Group is to identify a
series of opportunities, be they operational, competitive or
strategic, to address our underlying performance issues in our
existing businesses along with the necessary actions required to
address them and improve financial performance over time, while
setting a direction for the business for the next five years. To
improve our effectiveness, it will be essential that we enable much
closer collaboration across the Group and increase standardization
to leverage our overall scale.
The initial stages of the review confirmed the strength of and
opportunities for our businesses in North Asia, and we will
continue to build on these. However, it also identified the
challenges with several loss-making Supermarket and Hypermarket
stores across Southeast Asia, particularly in Malaysia, Singapore
and Indonesia, where we believe that performance was unlikely to
improve materially and took the decision to close these. In some of
our larger stores, there had also been a build-up of slow moving
stock, particularly in the general merchandise category, and we
have taken action to clear this through mark-down sales or have
written it off. Additional controls have been put in place to
reduce the risk of rebuying stock that is not meeting customer
needs.
In general, we have not responded fast enough to new competition
and changing consumer preferences across many of our markets, and
need to improve the shopping experience for our customers, as well
as addressing gaps in our range and becoming more price
competitive.
It is increasingly clear that customer buying behaviours are
changing with regard to both how people shop and preferences within
certain retail categories. As part of our change programme, we will
be undertaking a series of range reviews across our businesses to
ensure we are providing ranges relevant to our customers' needs in
a more tailored way. In addition, we are conducting greater
customer insight surveys to provide specific feedback on our store
proposition, as well as the overall shopping experience.
With more focus on delivering the right range for customers, we
need to ensure that we are competitive on price and making
investments in the right areas to deliver this. The acceleration of
our Own Brand range will be part of the effort to deliver
differentiated, quality products at attractive prices.
We are continuing to invest in both infrastructure and stores to
provide an even better shopping experience. New fresh distribution
centres in key markets will support an imperative to deliver better
quality fresh food to our stores.
Our overall ambition is to give our customers across Asia a
store they can trust, delivering quality, service and value.
2017 PERFORMANCE
In 2017, four of our five formats - Convenience Stores, Health
and Beauty, Home Furnishings and Restaurants - performed well, as
did our key Food associate, Yonghui, in mainland China. The Group
results were held back by the Supermarket and Hypermarket format,
particularly sales and profit declines in Southeast Asia, while our
largest business in Hong Kong was resilient. We have challenges in
specific areas, but many of our businesses are performing strongly
with clear growth trajectories.
In our Food Division, overall sales were 2% behind 2016. The
trading environment in the Supermarket and Hypermarket sector
continues to be challenging with intensifying and changing
competition. Sales in Hong Kong were flat and profit marginally
down, and both sales and profit were lower in Taiwan. Our key
markets in Southeast Asia of Malaysia, Singapore and Indonesia,
experienced declining sales and significantly lower profit,
although with different issues in each market. Consumer spending
generally in Malaysia is weak, independent discount retailers and
e-commerce are emerging competition in Singapore, and the mini-mart
operators continue to take market share in Indonesia, while
consumers are highly sensitive to pricing in all markets. The
Philippines, in contrast, saw strong like-for-like sales growth in
both its upscale and mass market formats and was only held back by
the unplanned closure of a hypermarket.
The Group's Convenience Store businesses have fared much better.
Both Hong Kong and mainland China enjoyed good sales growth, while
Macau sales were impacted by a higher cigarette tax and Singapore
had store closures on the back of the loss of a franchise operating
Shell's petrol station outlets. All four convenience store
businesses reported increased profit.
Operating profit from the Food Division dropped 18% to US$220
million before business change costs.
Sales in our Health and Beauty Division were up by 7%. There was
strong growth in Hong Kong, Macau, mainland China and Indonesia,
partly offset by muted sales growth in Malaysia and lower sales in
Singapore. Operating profit increased 20% to US$210 million due
mainly to strong performance in Hong Kong and Macau, attributable
to increased mainland China visitors. Encouraging progress in
Mannings China and margin improvements in Rose Pharmacy in the
Philippines were promising developments for the Division.
In our Home Furnishings Division, sales were up by 9% but
operating profit was 4% lower mainly due to pre-opening expenses
and higher costs related to our fourth Hong Kong store which was
opened in October 2017. Sales and profit gains were strong in both
Taiwan and Indonesia, with positive progress on new store
developments in both these markets.
Dairy Farm's Restaurants Division, Maxim's, delivered another
year of good results. A very successful mooncake programme during
the Chinese Mid-Autumn Festival bolstered its sales and profit
performance. Operations in mainland China also reported good
improvements while regional expansion continued with Starbucks in
Vietnam and Cambodia. During the year, Maxim's completed the
acquisitions of Starbucks in Singapore and Genki Sushi in Singapore
and Malaysia.
Our 19.99% owned associate, Yonghui, opened a net 292 new stores
in mainland China underpinning a 19% growth in revenue.
Improvements in margins led to year-on-year profit increasing
45%.
BUSINESS DEVELOPMENTS
During the year we have undertaken a number of pilot initiatives
to understand better the impact of changing consumer behaviour. For
example, in mainland China, our 7-Eleven business has partnered
with Meituan, a leading delivery service, on food delivery. Similar
initiatives are under trial with Happy Fresh in Malaysia and Go-Jek
in Indonesia. We expect to take learnings from these partnerships
back into our operations to improve the offer for customers.
IKEA has continued to invest in e-commerce and now has
nationwide capability in all our franchise markets.
We have also been refining a small format grocery concept in
both Malaysia and Indonesia in recognition of the increasing
popularity of more convenient shopping and the growing challenges
facing the hypermarket format. In mainland China, Yonghui has also
been expanding more rapidly into smaller retail stores.
We have separately completed the buy-out of the remaining
minority investment in Rustan, such that it is now wholly-owned,
and Maxim's has expanded further into Southeast Asia through a
couple of acquisitions. We will continue to look out for
non-organic investment opportunities that can accelerate our
growth.
BUSINESS REVIEW
FOOD
Food (excluding Yonghui) reported US$8.0 billion in sales, 1%
lower than last year in constant currency. Operating profit
decreased 18% to US$220 million, excluding business change costs,
driven by weak performance from the Supermarket and Hypermarket
businesses, particularly in Southeast Asia. In contrast to
Supermarkets and Hypermarkets, the Convenience Store format
performed well across all markets, mitigating the weaker
performance in the Food Division overall.
FOOD - SUPERMARKETS AND HYPERMARKETS
Sales of US$6.0 billion from our supermarkets and hypermarkets
were 3% lower than last year in constant currency, while operating
profit fell by 30% to US$135 million. Like-for-like sales were
generally weak or negative, other than in the Philippines where we
saw good growth. While Hong Kong was resilient, our Southeast Asian
businesses suffered from intensifying competition and changes in
consumer behaviour with lower sales and significantly reduced
profits.
HONG KONG
Despite a difficult operating environment and stiff price
competition, sales were largely in line with last year. With more
sites secured in key new locations, we continue to bolster our
store network in Hong Kong while also refining our e-commerce offer
to improve digital engagement with our customers. Operating profit
fell slightly with higher labour and rental costs, despite
implementing a number of productivity initiatives. Several key
stores were renovated during the year with the disruption further
impacting performance.
MACAU
Sales were ahead while profits were in line with last year due
to refurbishment works in our flagship store. During the year, a
new dry distribution centre was commissioned to sustain San Miu's
growth and improve our stores' assortment and range
availability.
TAIWAN
A decline in mainland Chinese tourist arrivals and weaker
consumer spending created a tough operating environment in 2017,
resulting in a decline in sales. However, the impact on
profitability was mitigated by disciplined cost control, such that
operating profit was only slightly behind last year. Our flagship
Jason's store at Taipei 101 was fully revamped and relaunched
during the year.
INDONESIA
Alongside a limited recovery in consumer confidence, the
intensifying competition from smaller format mini-mart operators
resulted in another challenging year for our Food businesses in
Indonesia, with sales and profits both substantially lower than
last year. Attention is being given to a review of our range to
ensure it is relevant for our customers while also ensuring that we
are competitive on price and service. Our upscale Hero brand has
fared better than our mass market brand, Giant, and promisingly,
our newly refurbished stores are proving popular with
customers.
MALAYSIA
Sales were slightly lower than prior year but profits were
significantly behind reflecting lower margins in another
challenging year. Falling household income and lower government
subsidies have contributed to subdued consumer sentiment, with
strong competition amongst retailers further intensifying pricing
pressure. To remain competitive, investment is being made in our
stores to improve the customer experience and we have opened a new
flagship Cold Storage store in KLCC in the centre of Kuala Lumpur.
Our new merchandising system was implemented during the year and we
expect to open our new, purpose-built fresh distribution centre in
the first half of 2018, which will improve our fresh food
capability. Several small format pilot stores have been opened and
initial results are encouraging. A range of cost saving measures,
including a reduction in headcount, were implemented during the
year.
THE PHILIPPINES
Sales were ahead of prior year driven by like-for-like growth
and new store openings, partially held back by the unplanned
closure of a large hypermarket. Our upscale brand, Rustan's,
performed extremely well and continues to lead the market with
customers in this segment. The acquisition of a further 34%
interest in Rustan was completed in the third quarter, making the
business a wholly-owned subsidiary of Dairy Farm. Significant
improvements in our supply chain are being made - a new,
purpose-built fresh distribution centre was opened during the year
and we expect to move to a new dry distribution centre in 2019.
SINGAPORE
Sales were down and profit was significantly below prior year
with lower margins and higher costs. There was increasing
competition in the market from the growth of independent discount
retailers and e-commerce players, resulting in intense price
competition. Cold Storage undertook a detailed range review during
the year, refreshing the offer across several categories. Early
signs are that this is resonating with customers and work is
continuing to drive improvements.
CAMBODIA
Sales and profit were in line with last year in Cambodia despite
being held back by store renovations. Looking ahead, we aim to
improve sales mix with higher fresh and Own Brand penetration.
FOOD - CONVENIENCE STORES
Convenience Stores reported US$2.0 billion in sales, an increase
of 4% over last year in constant currency. Operating profit
increased by 16% to US$85 million.
HONG KONG AND MACAU
7-Eleven Hong Kong recorded another year of excellent results,
building on the market share gains from last year. Like-for-like
sales growth was good, aided by exclusive product launches,
assortment improvement and a gain in consumer spending in certain
categories from other retail formats. We also introduced new
customer service initiatives, such as e-commerce delivery pick-up
and a self-service laundromat concept, in addition to expanding
payment options. In Macau, sales were impacted negatively by an
increase in the cigarette tax, although profit remained flat with
higher margin contribution from ready-to-eat food.
MAINLAND CHINA
In mainland China, 7-Eleven increased both sales and profit,
driven by both strong like-for-like sales and 92 net new store
openings to end the year with 920 stores. During the year, we
introduced the Meituan delivery service and WeChat self-checkout as
part of our drive to provide more convenient access to our products
and services. Meituan, one of China's largest online delivery
platforms, now covers 330 of our stores.
SINGAPORE
Like-for-like sales were ahead of prior year supported by
continued cooperation with 7-Eleven Japan delivering advances in
ready-to-eat and 7-Eleven's private label range. Overall sales
declined slightly due to the termination of a multi-site agreement
with Shell to service their petrol stations across the city.
Notwithstanding this, profitability improved during the year and
progress is being made to replace the lost stores with new
sites.
HEALTH AND BEAUTY
Health and Beauty achieved US$2.8 billion in total sales, an
increase of 7% in constant currency, while operating profit
increased 20% with better performance across most markets.
HONG KONG AND MACAU
Mannings Hong Kong recorded strong growth in both sales and
profit, driven by higher local consumption and a recovery in
tourist arrivals and spending. Like-for-like sales strengthened
throughout the year, particularly in the last quarter. Range
selection was reviewed to better serve both local and tourist
customer needs, while the introduction of new mobile payment
options and more relevant promotions were successful.
The recovery in Macau tourism supported a growth in sales and
profit ahead of last year, despite severe disruption to several
stores caused by Typhoon Hato. During the year there were
improvements in range selection, particularly in skin care, and a
new flagship store was opened in the Venetian Hotel to capture
tourist sales opportunities.
MAINLAND CHINA
Mannings China's performance was very encouraging with strong
like-for-like sales as well as a continued rollout of physical
stores and expansion of e-commerce initiatives. There has been more
focus on differentiation across several product categories with new
face mask centres proving especially popular. In addition, there
has been an increased focus on the beauty segment and several new
stores have been opened giving greater prominence to this category
with promising initial results. Our Own Brand range continues to
prove especially popular with our customers.
SINGAPORE
Despite fierce price competition, the growth of both discount
retailers and e-commerce and the closure of some stores, sales were
in line with last year in Singapore. However, profitability
declined, with margins impacted by aggressive sales promotions as
well as increased operating costs. As with other markets, greater
attention was given to our customers' beauty care needs, and a new
beauty focused store concept was opened in October featuring new
ranges including exclusive and Own Brand products.
MALAYSIA
After a challenging year in 2016, Guardian Malaysia recorded
sales growth during 2017 with positive like-for-like sales driven
by a strong performance in beauty care. However, pricing remains
very competitive in Malaysia, which together with higher costs
related to strengthening the team and the implementation of a new
merchandising system in the first half of the year, led to a
decline in profit.
INDONESIA
Guardian Indonesia delivered significant growth in both sales
and profit. Strong like-for-like sales growth was driven primarily
by beauty care where range enhancements proved to be popular with
customers. Having closed loss-making stores in 2016, and with
positive results from the range review, the business began to
expand again with new stores added during the year.
VIETNAM
Guardian Vietnam continued to deliver strong like-for-like sales
growth driven by higher customer footfall. Store openings also
boosted sales and the 50th store milestone was passed during the
year. Own Brand penetration remained strong, with the launch of our
premium skincare brand, Crystal Moist, in October being well
received by our customers.
CAMBODIA
Good progress continued in Cambodia with encouraging sales
growth, particularly in the Guardian Own Brand range.
THE PHILIPPINES
Sales fell slightly at Rose Pharmacy as a result of the closure
of a number of underperforming stores, although like-for-like sales
were positive. Operating results improved driven by cost controls
and a better sales mix. Sales of Guardian Own Brand items increased
significantly during the year with additional healthcare products
being added to the personal care and beauty categories.
HOME FURNISHINGS
IKEA achieved record sales again in 2017, bolstered by the
opening of a new store in Hong Kong and strong performances in
Taiwan and Indonesia. In constant currency, sales rose by 7% to
US$653 million, although operating profit fell slightly to US$68
million, after absorbing new store pre-opening costs totalling US$9
million.
All markets recorded sales growth, with Taiwan and Indonesia
achieving strong like-for-like growth and increased profit. Profit
in Hong Kong was lower largely due to the pre-opening costs and
additional costs of the new store which also resulted in lower
overall profit for the Division.
In 2017, we fully launched e-commerce and now have the
capability for nationwide delivery across all our markets, making
IKEA more accessible to 'the many people'. Our Taichung store in
Taiwan was selected as one of the Top 5 stores in the global IKEA
network, reflecting the dedicated efforts of our team members in
serving our customers.
We are also aggressively pursuing physical expansion in all
markets. A fourth IKEA store was opened in Tsuen Wan, Hong Kong in
October and is already trading well. Some progress was made on a
second store in Indonesia with the acquisition of a second site in
Jakarta and although licensing approvals are taking longer than
planned, development pace is expected to pick up in 2018. Our
rollout of distribution points in Jakarta and Surabaya in Indonesia
enhanced accessibility further. In Taiwan, we have secured new
sites in Taoyuan and South Taipei, with these stores expected to
open in 2019 and 2021 respectively.
In the coming year, we aim to boost our business as we look to
accelerate the growth of our store network while developing new
online platforms, including a presence on selective marketplace
sites. In addition, we will continue to improve affordability and
service to bring better value to 'the many people'.
RESTAURANTS
Maxim's reported another record year, with US$2.2 billion in
total sales, an increase of 11% over the previous year in constant
currency, while profit contribution increased by 9%. The business
had a particularly strong performance in both its mainland China
operations and branded products division, while actively expanding
through acquisitions into new markets. Maxim's also celebrated the
opening of its 1,000th store - the Symphony by Jade in Hong
Kong.
In Hong Kong, the business achieved healthy sales and profit
growth and enjoyed the first full year of operation of COVA.
Maxim's mooncakes achieved another year of record high sales,
driven by the popularity of its Lava Custard Mooncake. 2017 also
saw the creation of new concepts and the award and launch of new
franchises, with the first The Cheesecake Factory opening in Hong
Kong during the year.
In mainland China, all formats performed ahead of last year as
Maxim's continued to expand, launching new brands in Beijing and
Hangzhou and moving into Nanning in the southwest of the country.
In Beijing, there were two major brand launches during the year,
Café Landmark and Jade Garden, with The Cheesecake Factory set to
open in early 2018.
Maxim's underlined its growing regional ambitions with the
acquisition of the existing business and Starbucks franchise in
Singapore and the Genki Sushi franchises in Singapore and Malaysia
in September 2017.
THE YEAR AHEAD
Retailers everywhere are facing rapid and unprecedented change
from new business models, as well as the changing lifestyles and
increased expectations of consumers. These developments necessitate
greater urgency in everything we do and a much closer relationship
with and deeper understanding of our customers, as well as a need
to embrace new technologies and different ways of working. However,
we have a well-established presence and long track record serving
customers in all the markets we operate, which should allow us to
leverage our unique Asian footprint for future success.
With our strong cash generation, solid balance sheet and
enthusiastic team, we are in a good position to meet these
challenges. The Group will focus on key priorities; growing our
major markets, improving profitability in our Southeast Asia Food
business, identifying further growth opportunities and improving
our digital capability. With the depth of our Asian know-how and
the breadth of our retail formats, we are well placed to benefit
from the growth prospects in the region.
The passion and commitment of our people are key to our
performance and future growth. I would like to thank them for their
contribution and look forward to working more closely with team
members over the coming year as we build for the future.
Ian McLeod
Group Chief Executive
Dairy Farm International Holdings Limited
Consolidated Profit and Loss Account
for the year ended 31st December 2017
2017 2016
Underlying Non- Underlying Non-
business trading business trading
performance items Total performance items Total
US$m US$m US$m US$m US$m US$m
Sales (note 2) 11,288.7 - 11,288.7 11,200.7 - 11,200.7
Cost of sales (7,856.1) - (7,856.1) (7,815.2) - (7,815.2)
----------- ------- --------- ----------- ------- ---------
Gross margin 3,432.6 - 3,432.6 3,385.5 - 3,385.5
Other operating
income
(note 3) 182.4 0.5 182.9 171.8 6.2 178.0
Selling and
distribution
costs (2,714.1) - (2,714.1) (2,634.9) - (2,634.9)
Administration
and other
operating
expenses (533.5) - (533.5) (469.8) - (469.8)
----------- ------- --------- ----------- ------- ---------
Operating profit
(note 4) 367.4 0.5 367.9 452.6 6.2 458.8
Financing charges (28.0) - (28.0) (23.3) - (23.3)
Financing income 1.7 - 1.7 1.5 - 1.5
Net financing
charges (26.3) - (26.3) (21.8) - (21.8)
Share of results
of associates and
joint ventures
(note 5) 143.4 0.8 144.2 114.5 3.7 118.2
----------- ------- --------- ----------- ------- ---------
Profit before tax 484.5 1.3 485.8 545.3 9.9 555.2
Tax (note 6) (92.5) (0.4) (92.9) (85.1) - (85.1)
----------- ------- --------- ----------- ------- ---------
Profit after tax 392.0 0.9 392.9 460.2 9.9 470.1
----------- ------- --------- ----------- ------- ---------
Attributable to:
Shareholders of
the Company 402.6 0.9 403.5 460.2 8.8 469.0
Non-controlling
interests (10.6) - (10.6) - 1.1 1.1
----------- ------- --------- ----------- ------- ---------
392.0 0.9 392.9 460.2 9.9 470.1
----------- ------- --------- ----------- ------- ---------
USc USc USc USc
Earnings per
share
(note 7)
* basic 29.77 29.83 34.03 34.69
* diluted 29.76 29.82 34.02 34.68
----------- --------- ----------- ---------
Dairy Farm International Holdings Limited
Consolidated Statement of Comprehensive Income
for the year ended 31st December 2017
2017 US$m 2016 US$m
Profit for the year 392.9 470.1
Other comprehensive income/(expense)
--------- ---------
Items that will not be reclassified
to profit or loss:
--------- ---------
Remeasurements of defined benefit
plans 19.2 20.9
Tax relating to items that will not
be reclassified (2.6) (4.4)
16.6 16.5
Share of other comprehensive income/(expense)
of associates and joint ventures 5.4 (1.1)
--------- ---------
22.0 15.4
--------- ---------
Items that may be reclassified subsequently
to profit or loss:
Net exchange translation differences
- net gain/(loss) arising during the
year 38.0 (7.3)
Revaluation of other investments
- gain/(loss) arising during the year 1.0 (0.9)
Cash flow hedges
--------- ---------
- net (loss)/gain arising during the
year (1.8) 2.0
- transfer to profit and loss 0.2 (0.4)
(1.6) 1.6
Tax relating to items that may be
reclassified 0.1 (0.1)
Share of other comprehensive income/(expense)
of associates and joint ventures 68.6 (76.4)
--------- ---------
106.1 (83.1)
--------- ---------
Other comprehensive income/(expense)
for the year, net of tax 128.1 (67.7)
--------- ---------
Total comprehensive income for the
year 521.0 402.4
--------- ---------
Attributable to:
Shareholders of the Company 532.8 398.0
Non-controlling interests (11.8) 4.4
--------- ---------
521.0 402.4
--------- ---------
Dairy Farm International Holdings Limited
Consolidated Balance Sheet
at 31st December 2017
2017 US$m 2016 US$m
Net operating assets
Intangible assets 814.7 765.1
Tangible assets 1,184.2 1,099.5
Associates and joint ventures 1,601.0 1,461.8
Other investments 6.9 5.9
Non-current debtors 162.6 150.8
Deferred tax assets 26.4 29.0
Non-current assets 3,795.8 3,512.1
Stocks 950.0 983.1
Current debtors 350.7 290.5
Current tax assets 27.1 16.8
Bank balances and other liquid funds 332.4 323.8
--------- ---------
1,660.2 1,614.2
Assets classified as held for sale 11.2 2.6
--------- ---------
Current assets 1,671.4 1,616.8
--------- ---------
Current creditors (2,469.5) (2,327.9)
Current borrowings (412.7) (369.6)
Current tax liabilities (71.6) (58.6)
Current provisions (52.5) (14.8)
--------- ---------
(3,006.3) (2,770.9)
Liabilities directly associated with assets
classified as held for sale (6.2) -
Current liabilities (3,012.5) (2,770.9)
--------- ---------
Net current liabilities (1,341.1) (1,154.1)
Long-term borrowings (522.0) (595.0)
Deferred tax liabilities (62.7) (56.6)
Pension liabilities (34.2) (52.4)
Non-current creditors (42.7) (42.9)
Non-current provisions (37.4) (31.7)
Non-current liabilities (699.0) (778.6)
1,755.7 1,579.4
--------- ---------
Total equity
Share capital 75.1 75.1
Share premium and capital reserves 57.9 59.4
Revenue and other reserves 1,557.0 1,370.8
--------- ---------
Shareholders' funds 1,690.0 1,505.3
Non-controlling interests 65.7 74.1
---------
1,755.7 1,579.4
--------- ---------
Dairy Farm International Holdings Limited
Consolidated Statement of Changes in Equity
for the year ended 31st December 2017
Attributable to shareholders of the Company Attributable
---------------------------------------------------
Revenue
Share Share Capital and other to non-controlling Total
capital premium reserves reserves Total interests equity
US$m US$m US$m US$m US$m US$m US$m
2017
At 1st January 75.1 31.1 28.3 1,370.8 1,505.3 74.1 1,579.4
Total comprehensive
income - - - 532.8 532.8 (11.8) 521.0
Dividends paid by the
Company (note 9) - - - (284.0) (284.0) - (284.0)
Dividends paid to
non-controlling
interests - - - - - (0.5) (0.5)
Unclaimed dividends
forfeited - - - 0.6 0.6 - 0.6
Employee share option
schemes - - 1.6 - 1.6 - 1.6
Change in interests in
subsidiaries - - - (66.4) (66.4) 6.3 (60.1)
Change in interests in
associates and joint
ventures - - - 0.1 0.1 - 0.1
Capital repayment to
non-controlling
interests - - - - - (2.4) (2.4)
Transfer - 2.0 (5.1) 3.1 - - -
At 31st December 75.1 33.1 24.8 1,557.0 1,690.0 65.7 1,755.7
2016
At 1st January 75.1 31.1 30.2 1,239.4 1,375.8 79.4 1,455.2
Total comprehensive
income - - - 398.0 398.0 4.4 402.4
Dividends paid by the
Company (note 9) - - - (270.4) (270.4) - (270.4)
Dividends paid to
non-controlling
interests - - - - - (3.1) (3.1)
Unclaimed dividends
forfeited - - - 0.6 0.6 - 0.6
Employee share option
schemes - - 1.3 - 1.3 - 1.3
Change in interest in a
subsidiary - - - - - (2.2) (2.2)
Capital repayment to
non-controlling
interests - - - - - (4.4) (4.4)
Transfer - - (3.2) 3.2 - - -
--------- -------- --------- ---------- ------- ------------------ -------
At 31st December 75.1 31.1 28.3 1,370.8 1,505.3 74.1 1,579.4
--------- -------- --------- ---------- ------- ------------------ -------
Total comprehensive income included in revenue reserves comprises profit attributable to shareholders
of the Company of US$403.5 million (2016: US$469.0 million) and net fair value loss on other investments
of US$0.9 million (2016: US$0.6 million). Cumulative net fair value gain on other investments amounted
to US$3.9 million (2016: US$4.8 million).
Dairy Farm International Holdings Limited
Consolidated Cash Flow Statement
for the year ended 31st December 2017
2017 US$m 2016 US$m
Operating activities
--------- ---------
Operating profit (note 4) 367.9 458.8
Depreciation and amortization 221.0 212.8
Other non-cash items 16.1 8.4
Decrease/(increase) in working capital 92.1 (97.1)
Interest received 1.6 1.3
Interest and other financing charges paid (28.0) (22.0)
Tax paid (84.3) (85.3)
--------- ---------
586.4 476.9
Dividends from associates and joint ventures 84.9 66.0
Cash flows from operating activities 671.3 542.9
Investing activities
--------- ---------
Purchase of associates and joint ventures
(note 10(a)) (5.8) (197.0)
Purchase of intangible assets (60.9) (32.1)
Purchase of tangible assets (218.4) (212.5)
Sale of convenience stores in Indonesia
and restaurants in Cambodia - 5.1
Sale of properties (note 10(b)) 3.2 7.2
Sale of tangible assets 1.3 1.3
Cash flows from investing activities (280.6) (428.0)
Financing activities
--------- ---------
Change in interests in subsidiaries (note
10(c)) (60.1) (2.2)
Capital repayment to non-controlling interests (2.4) (4.4)
Drawdown of borrowings 851.0 1,769.7
Repayment of borrowings (1,014.2) (1,660.6)
Net increase in other short-term borrowings 122.3 128.5
Dividends paid by the Company (note 9) (284.0) (270.4)
Dividends paid to non-controlling interests (0.5) (3.1)
Cash flows from financing activities (387.9) (42.5)
Net increase in cash and cash equivalents 2.8 72.4
Cash and cash equivalents at 1st January 322.6 256.7
Effect of exchange rate changes 9.1 (6.5)
--------- ---------
Cash and cash equivalents at 31st December
(note 10(d)) 334.5 322.6
--------- ---------
Dairy Farm International Holdings Limited
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information contained in this announcement has
been based on the audited results for the year ended 31st December
2017 which have been prepared in conformity with International
Financial Reporting Standards, including International Accounting
Standards and Interpretations adopted by the International
Accounting Standards Board.
There are no new standards or amendments, which are effective in
2017 and relevant to the Group's operations, that have a material
impact on the Group's accounting policies and disclosures.
2. SALES
Including associates
and joint ventures Subsidiaries
---------------------- ------------------
2017 2016 2017 2016
US$m US$m US$m US$m
Analysis by operating
segment:
Food 16,148.7 15,174.7 8,038.3 8,167.9
- Supermarkets/hypermarkets 14,128.7 13,224.1 6,018.3 6,217.3
- Convenience stores 2,020.0 1,950.6 2,020.0 1,950.6
Health and Beauty 2,787.2 2,632.8 2,597.4 2,435.9
Home Furnishings 653.0 596.9 653.0 596.9
Restaurants 2,238.1 2,019.2 - -
---------- ---------- -------- --------
21,827.0 20,423.6 11,288.7 11,200.7
---------- ---------- -------- --------
Sales including associates and joint ventures comprise 100% of
sales from associates and joint ventures.
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by the Board for the purpose of resource allocation and performance
assessment. Dairy Farm operates in four segments: Food, Health and
Beauty, Home Furnishings and Restaurants. Food comprises
supermarket, hypermarket and convenience store businesses
(including the Group's associate, Yonghui, a leading
supermarket/hypermarket retailer in mainland China). Health and
Beauty comprises the health and beauty businesses. Home Furnishings
is the Group's IKEA businesses. Restaurants is the Group's catering
associate, Maxim's, a leading Hong Kong restaurant chain.
3. OTHER OPERATING INCOME
2017 US$m 2016 US$m
Concession and service income 145.4 139.8
Rental income from properties 27.9 27.8
Profit on sale of properties 0.5 3.0
Net closure costs reversal for convenience
stores in Indonesia - 2.2
Profit on sale of restaurants in Cambodia - 1.0
Net foreign exchange gains and others 9.1 4.2
--------- ---------
182.9 178.0
--------- ---------
4. OPERATING PROFIT
2017 US$m 2016 US$m
Analysis by operating segment:
Food 220.0 267.2
- Supermarkets/hypermarkets 135.1 193.7
- Convenience stores 84.9 73.5
Health and Beauty 209.9 175.5
Home Furnishings 68.0 70.6
--------- ---------
497.9 513.3
Store support centre (57.7) (60.7)
440.2 452.6
Business change costs (72.8) -
--------- ---------
367.4 452.6
Non-trading items:
- profit on sale of properties 0.5 3.0
* net closure costs reversal for convenience stores in
Indonesia - 2.2
- profit on sale of restaurants in Cambodia - 1.0
--------- ---------
367.9 458.8
--------- ---------
Business change costs
In order to provide shareholders with further information on the
performance of the business, underlying operating profit and
underlying profit attributable to shareholders are further analyzed
below:
Underlying profit
Underlying attributable to
operating profit shareholders
2017 US$m 2016 US$m 2017 US$m 2016 US$m
As reported 367.4 452.6 402.6 460.2
Business change costs 72.8 - 64.5 -
--------- ---------
Adjusted profit 440.2 452.6 467.1 460.2
--------- --------- --------- ---------
Following a review of the Food businesses in Southeast Asia,
management took the decision to exit various stores and stock
categories, a charge of US$61.1 million was recognized in the
profit and loss. In addition, a restructuring cost of US$11.7
million for the Group was also recognized in the profit and
loss.
5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
2017 US$m 2016 US$m
Analysis by operating segment:
Food - Supermarkets/hypermarkets 54.0 35.6
Health and Beauty (5.0) (5.3)
Restaurants 95.2 87.9
--------- ---------
144.2 118.2
--------- ---------
Share of results of associates and joint ventures in 2017
included the share of a net gain of US$0.8 million on the disposal
of an investment by Yonghui Superstores Co., Ltd ('Yonghui'), while
in 2016, it included the share of a net gain of US$3.7 million on
the disposal of interest in an associate by Yonghui (note 8).
Results are shown after tax and non-controlling interests in the
associates and joint ventures.
6. TAX
2017 US$m 2016 US$m
Tax charged to profit and loss is analyzed
as follows:
Current tax (86.9) (82.0)
Deferred tax (6.0) (3.1)
--------- ---------
(92.9) (85.1)
--------- ---------
Tax relating to components of other comprehensive
income/(expense) is analyzed as follows:
Remeasurements of defined benefit plans (2.6) (4.4)
Revaluation of other investments (0.2) 0.2
Cash flow hedges 0.3 (0.3)
--------- ---------
(2.5) (4.5)
--------- ---------
Tax on profit has been calculated at rates of taxation
prevailing in the territories in which the Group operates. Share of
tax charge of associates and joint ventures of US$32.0 million
(2016: US$29.4 million) is included in share of results of
associates and joint ventures.
7. EARNINGS PER SHARE
Basic earnings per share are calculated on profit attributable
to shareholders of US$403.5 million (2016: US$469.0 million), and
on the weighted average number of 1,352.4 million (2016: 1,352.2
million) shares in issue during the year.
Diluted earnings per share are calculated on profit attributable
to shareholders of US$403.5 million (2016: US$469.0 million), and
on the weighted average number of 1,353.0 million (2016: 1,352.5
million) shares in issue after adjusting for 0.6 million (2016: 0.3
million) shares which are deemed to be issued for no consideration
under the share-based long-term incentive plans based on the
average share price during the year.
Additional basic and diluted earnings per share are also
calculated based on underlying profit attributable to shareholders.
A reconciliation of earnings is set out below:
2017 2016
----------------------------- -----------------------------
Basic Diluted Basic Diluted
earnings earnings earnings earnings
per share per share per share per share
US$m USc USc US$m USc USc
Profit attributable
to shareholders 403.5 29.83 29.82 469.0 34.69 34.68
Non-trading
items (note
8) (0.9) (8.8)
----- -----
Underlying
profit attributable
to shareholders 402.6 29.77 29.76 460.2 34.03 34.02
----- -----
8. NON-TRADING ITEMS
Non-trading items are separately identified to provide greater
understanding of the Group's underlying business performance. Items
classified as non-trading items include gains and losses arising
from the sale of businesses, investments and properties; impairment
of non-depreciable intangible assets and other investments;
provisions for the closure of businesses; acquisition-related costs
in business combinations; and other credits and charges of a
non-recurring nature that require inclusion in order to provide
additional insight into underlying business performance.
An analysis of non-trading items after interest, tax and
non-controlling interests is set out below:
2017 US$m 2016 US$m
Profit on sale of properties 0.1 2.5
Net closure costs reversal for convenience
stores in Indonesia - 1.9
Profit on sale of restaurants in Cambodia - 0.7
Share of net gain from disposal of an investment/an
associate by Yonghui 0.8 3.7
0.9 8.8
--------- ---------
9. DIVIDS
2017 US$m 2016 US$m
Final dividend in respect of 2016 of USc14.50
(2015: USc13.50) per share 196.1 182.5
Interim dividend in respect of 2017 of USc6.50
(2016: USc6.50) per share 87.9 87.9
--------- ---------
284.0 270.4
--------- ---------
A final dividend in respect of 2017 of USc14.50 (2016: USc14.50)
per share amounting to a total of US$196.1 million (2016: US$196.1
million) is proposed by the Board. The dividend proposed will not
be accounted for until it has been approved at the 2018 Annual
General Meeting. This amount will be accounted for as an
appropriation of revenue reserves in the year ending 31st December
2018.
10. NOTES TO CONSOLIDATED CASH FLOW STATEMENT
(a) Purchase of associates and joint ventures in 2017 mainly
related to the Group's capital injection of US$3.4 million in the
business in Vietnam and US$2.4 million in Rose Pharmacy, Inc.
('Rose') which operates a health and beauty business in the
Philippines.
Purchase in 2016 mainly related to the Group's further
investment in Yonghui, a supermarket and hypermarket operator in
mainland China, amounting to US$190.2 million and a capital
injection of US$4.3 million in Rose and US$2.5 million in the
Group's business in Vietnam.
(b) Sale of properties
Sale of properties in 2017 included sale of land in Malaysia and
a property in Taiwan for a total cash consideration of US$3.2
million.
Sale in 2016 included sale of properties in Indonesia for a
total cash consideration of US$7.2 million.
(c) Change in interests in subsidiaries
In August 2017, the Group acquired a further 34% interest in
Rustan Supercenters, Inc. in the Philippines for a total
consideration of US$59.9 million, such that it is now a
wholly-owned subsidiary of the Group.
In October 2017, the Group acquired an additional 0.06% interest
in PT Hero Supermarket Tbk for a total consideration of US$0.2
million, whereas in 2016, an additional 0.52% interest was acquired
for US$2.2 million.
(d) Analysis of balances of cash and cash equivalents
2017 US$m 2016 US$m
Bank balances and other liquid funds 332.4 323.8
Bank overdrafts (1.1) (1.2)
Cash and bank balances included in assets
held for sale 3.2 -
334.5 322.6
--------- ---------
11. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
Total capital commitments at 31st December 2017 amounted to
US$338.7 million (2016: US$298.1 million).
Various Group companies are involved in litigation arising in
the ordinary course of their respective businesses. Having reviewed
outstanding claims and taking into account legal advice received,
the Directors are of the opinion that adequate provisions have been
made in the financial statements.
12. RELATED PARTY TRANSACTIONS
The parent company of the Group is Jardine Strategic Holdings
Limited and the ultimate parent company is Jardine Matheson
Holdings Limited ('JMH'). Both companies are incorporated in
Bermuda.
In the normal course of business the Group undertakes a variety
of transactions with JMH and its subsidiaries, associates and joint
ventures. The more significant of such transactions are described
below.
Under the terms of a Management Services Agreement, the Group
paid a management fee of US$2.0 million (2016: US$2.3 million) to
Jardine Matheson Limited ('JML'), a wholly-owned subsidiary of JMH,
based on 0.5% of the Group's profit attributable to shareholders in
consideration for certain management consultancy services provided
by JML. The Group also paid directors' fees of US$0.5 million in
2017 (2016: US$0.5 million) to JML.
The Group rents properties from Hongkong Land Holdings Limited
('HKL'), a subsidiary of JMH. The gross annual rentals paid by the
Group to HKL in 2017 were US$3.0 million (2016: US$2.8 million).
The Group's 50%-owned associate, Maxim's Caterers Limited
('Maxim's'), also paid gross annual rentals of US$11.8 million
(2016: US$11.2 million) to HKL in 2017.
The Group uses Jardine Lloyd Thompson Limited ('JLT'), an
associate of JMH, to place certain of its insurance policies.
Brokerage fees and commissions, net of rebates, paid by the Group
to JLT in 2017 were US$2.0 million (2016: US$2.1 million).
The Group sources information technology infrastructure and
related services from Jardine Technology Holdings Limited ('JTH'),
a subsidiary of JMH. The total fees paid by the Group to JTH in
2017 amounted to US$9.9 million (2016: US$9.5 million). Maxim's
also paid total fees of US$3.5 million (2016: US$3.5 million) to
JTH in 2017.
The Group also obtains repairs and maintenance services from
Jardine Engineering Corporation ('JEC'), a subsidiary of JMH. The
total fees paid by the Group to JEC in 2017 amounted to US$9.3
million (2016: US$5.6 million).
Maxim's supplies ready-to-eat products at arm's length to
certain subsidiaries of the Group. In 2017, these amounted to
US$30.5 million (2016: US$27.6 million).
In addition, Gammon Construction, a joint venture of JMH, was
engaged by Maxim's to provide construction and renovation works
amounting to US$8.6 million (2016: US$24.4 million) in 2017.
There were no other related party transactions that might be
considered to have a material effect on the financial position or
performance of the Group that were entered into or changed during
the year.
Amounts of outstanding balances with associates and joint
ventures are included in debtors and creditors, as appropriate.
Dairy Farm International Holdings Limited
Principal Risks and Uncertainties
The Board has overall responsibility for risk management and
internal control. The process by which the Group identifies and
manages risk will be set out in more detail in the Corporate
Governance section of the Company's 2017 Annual Report (the
'Report'). The following are the principal risks and uncertainties
facing the Company as required to be disclosed pursuant to the
Disclosure Guidance and Transparency Rules issued by the Financial
Conduct Authority in the United Kingdom and are in addition to the
matters referred to in the Chairman's Statement and Group Chief
Executive's Review.
Economic Risk
Most of the Group's businesses are exposed to the risk of
negative developments in global and regional economies and
financial markets, either directly or through the impact on the
Group's joint venture partners, franchisors, bankers, suppliers or
customers. These developments can result in recession, inflation,
deflation, currency fluctuations, restrictions in the availability
of credit, business failures, or increases in financing costs, oil
prices and in the cost of raw materials and finished products. Such
developments might increase operating costs, reduce revenues, lower
asset values or result in the Group's businesses being unable to
meet in full their strategic objectives.
Commercial Risk and Financial Risk
Risks are an integral part of normal commercial practices, and
where practicable steps are taken to mitigate such risks. These
risks are further pronounced when operating in volatile markets.
While the Group's regional diversification does help to mitigate
some risks, a significant portion of the Group revenues and profits
continue to be derived from our operations in Hong Kong.
A number of the Group's businesses make significant investment
decisions in respect of developments or projects that take time to
come to fruition and achieve the desired returns and are,
therefore, subject to market risks.
The Group's businesses operate in areas that are highly
competitive, and failure to compete effectively in terms of price,
product specification, technology, property site or levels of
service or to adapt to changing consumer behaviours, including new
shopping channels and formats, can have an adverse effect on
earnings. Significant pressure from such competition may also lead
to reduced margins. The quality and safety of the products and
services provided by the Group's businesses are also important and
there is an associated risk if they are below standard, while any
damage to brand equity or reputation might adversely impact the
ability to achieve acceptable revenues and profit margins.
The steps taken by the Group to manage its exposure to financial
risk will be set out in the Financial Review and in a note to the
Financial Statements in the Report.
Concessions, Franchises and Key Contracts
A number of the Group's businesses and projects are reliant on
concessions, franchises, management or other key contracts.
Cancellation, expiry or termination, or the renegotiation of any
such concessions, franchises, management or other key contracts,
could have an adverse effect on the financial condition and results
of operations of certain subsidiaries, associates and joint
ventures of the Group.
Regulatory and Political Risk
The Group's businesses are subject to a number of regulatory
environments in the territories in which they operate. Changes in
the regulatory approach to such matters as foreign ownership of
assets and businesses, exchange controls, licensing, imports,
planning controls, emission regulations, tax rules and employment
legislation have the potential to impact the operations and
profitability of the Group's businesses. Changes in the political
environment in such territories can also affect the Group's
businesses.
Terrorism, Pandemic and Natural Disasters
A number of the Group's operations are vulnerable to the effects
of terrorism, either directly through the impact of an act of
terrorism or indirectly through the impact of generally reduced
economic activity in response to the threat of or an actual act of
terrorism.
All Group businesses would be impacted by a global or regional
pandemic which could be expected to seriously affect economic
activity and the ability of our businesses to operate smoothly. In
addition, many of the territories in which the Group operates can
experience from time to time natural disasters such as earthquakes,
volcanoes and typhoons.
Technology Risk
The Group has invested significantly in and is heavily reliant
on its IT infrastructure and systems for the daily operation of its
business. Any major disruption to the Group's IT systems could have
a significant impact on operations. The ability to anticipate and
adapt to technology advancements or threats is an additional risk
that may also have an impact on the business.
Dairy Farm International Holdings Limited
Responsibility Statement
The Directors of the Company confirm to the best of their
knowledge that:
a. the consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards,
including International Accounting Standards and Interpretations
adopted by the International Accounting Standards Board; and
b. the sections of the Company's 2017 Annual Report, including
the Chairman's Statement, Group Chief Executive's Review, Business
Review and Principal Risks and Uncertainties, which constitute the
management report include a fair review of all information required
to be disclosed by the Disclosure Guidance and Transparency Rules
4.1.8 to 4.1.11 issued by the Financial Conduct Authority in the
United Kingdom.
For and on behalf of the Board
Ian McLeod
Neil Galloway
Directors
The final dividend of USc14.50 per share will be payable on
16th May 2018, subject to approval at the Annual General Meeting
to be held on 9th May 2018, to shareholders on the register
of members at the close of business on 23rd March 2018. The
shares will be quoted ex-dividend on the Singapore Exchange
and the London Stock Exchange on 21st and 22nd March 2018,
respectively. The share registers will be closed from 26th
to 30th March 2018, inclusive.
Shareholders will receive their cash dividends in United States
dollars, unless they are registered on the Jersey branch register
where they will have the option to elect for sterling. These
shareholders may make new currency elections for the 2017
final dividend by notifying the United Kingdom transfer agent
in writing by 27th April 2018. The sterling equivalent of
dividends declared in United States dollars will be calculated
by reference to a rate prevailing on 2nd May 2018.
Shareholders holding their shares through CREST in the United
Kingdom will receive their cash dividends in sterling only
as calculated above. Shareholders holding their shares through
The Central Depository (Pte) Limited ('CDP') in Singapore
will receive their cash dividends in United States dollars
unless they elect, through CDP, to receive Singapore dollars.
Shareholders on the Singapore branch register who wish to
deposit their shares into the CDP system by the dividend record
date, being 23rd March 2018, must submit the relevant documents
to M & C Services Private Limited, the Singapore branch registrar,
no later than 5.00 p.m. (local time) on 22nd March 2018.
Dairy Farm
Dairy Farm is a leading pan-Asian retailer. At 31st December
2017, the Group and its associates and joint ventures operated over
7,100 outlets and employed some 200,000 people. It had total annual
sales in 2017 exceeding US$21 billion.
The Group aims to provide quality and value to Asian consumers
by offering leading brands, a compelling retail experience and
great service; all provided through a strong store network
supported by efficient supply chains.
The Group operates under a number of well-known brands across
four divisions. The principal brands are:
Food
-- Supermarkets/Hypermarkets - Wellcome in Hong Kong, Taiwan and
the Philippines; Yonghui in mainland China; Cold Storage in
Singapore and Malaysia; Giant in Malaysia, Indonesia, Singapore and
Brunei; Hero in Indonesia; and Rustan's and Shopwise in the
Philippines
-- Convenience stores - 7-Eleven in Hong Kong, Singapore, Southern China and Macau
Health and Beauty
-- Mannings in Greater China; Guardian in Malaysia, Indonesia,
Singapore, Vietnam, Brunei and Cambodia; and Rose Pharmacy in the
Philippines
Home Furnishings
-- IKEA in Hong Kong, Macau, Taiwan and Indonesia
Restaurants
-- Maxim's in Hong Kong, mainland China, Macau, Singapore,
Vietnam, Cambodia and Thailand (directly and via various joint
ventures or franchises)
Dairy Farm International Holdings Limited is incorporated in
Bermuda and has a standard listing on the London Stock Exchange,
with secondary listings in Bermuda and Singapore. The Group's
businesses are managed from Hong Kong by Dairy Farm Management
Services Limited through its regional offices. Dairy Farm is a
member of the Jardine Matheson Group.
- end -
For further information, please contact:
Dairy Farm Management Services Limited
Ian McLeod (852) 2299 1881
Neil Galloway (852) 2299 1896
Brunswick Group Limited
Susan Ho (852) 3512 5069
Full text of the Preliminary Announcement of Results and the
Preliminary Financial Statements for the year ended 31st December
2017 can be accessed through the Internet at
www.dairyfarmgroup.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BBGDXLXGBGIR
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